Tencent, Baidu and Alibaba prefer to keep their profits from enforcing their online payment methods below the line. With high volumes, the charges for these transactions add up to a considerable amount. The Chinese Government is questioning whether they have a right to enforce themselves as financial service providers. It is mulling over obligating them to offer their rivals’ online payment services as well as their own.
Online Payment Methods Part of Broader Focus
The Chinese Communist Party has been uncomfortable with a largely unregulated internet for some time. This runs counter to its strategy of central control to promote regulated growth. The past few years have seen new rules for cyber-security, ecommerce and censorship. It was just a matter of time before it tackled virtual online payment methods too.
People’s Bank of China Throws Down Gauntlet
On Friday, 31 July 2015 China’s central banking authority notified citizens on its website that, “Payment institutions should fully respect customer’s right to choose, and must not force customers to use the internet payment service they provide, and also must not stop customers using other online payment methods provided by other institutions.”
Tencent, Baidu and Alibaba’s Response
China’s three ecommerce giants are playing their cards close to their chests on this one. They know they are outnumbered, and that their best bet is to go with the flow. China has the world’s largest population and the highest number of mobile users. This market is still expanding in new directions. A choice of online payment methods might speed the process up.
The market will be watching this one closely to see what happens next. In 2014, China’s e-commerce transactions reached 16 trillion yuan according to a National Bureau of Statistics’ report. Thar was up 59.4 percent year on year. This is why there is such fierce competition between online payment methods to dominate China’s markets.